Whitman Company has just completed its first year of operations. The company’s absorption costing income statement for...

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Whitman Company hasjust completed its first year of operations. The company’sabsorption costing income statement for the year follows:
Whitman Company
Income Statement
Sales (41,000units × $43.10 per unit) $ 1,767,100
Cost of goodssold (41,000 units × $23 per unit) 943,000
Grossmargin 824,100
Selling andadministrative expenses 471,500
Net operatingincome $ 352,600
The company’s sellingand administrative expenses consist of $307,500 per year in fixedexpenses and $4 per unit sold in variable expenses. The $23 unitproduct cost given above is computed as follows:
Directmaterials $ 11
Directlabor 4
Variablemanufacturing overhead 3
Fixedmanufacturing overhead ($250,000 ÷ 50,000 units) 5
Absorptioncosting unit product cost $ 23
Required:
1. Redo the company’sincome statement in the contribution format using variablecosting.
2. Reconcile anydifference between the net operating income on your variablecosting income statement and the net operating income on theabsorption costing income statement above.
variable costing netoperating income
___________________
absorption costing netoperating income _

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4.4 Ratings (746 Votes)

Answer1 Whitman Company Contribution Income statement Using variable costing approach Particulars Amount Sales a 41000 units4310 per unit 1767100 Less Variable cost of goods sold b Opening inventory NIL Add Variable cost of goods manufactured 900000 See Answer

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Whitman Company Income Statement
Sales (41,000units × $43.10 per unit)	$	1,767,100
Cost of goodssold (41,000 units × $23 per unit)		943,000
Grossmargin		824,100
Selling andadministrative expenses		471,500
Net operatingincome	$	352,600


Directmaterials	$	11
Directlabor		4
Variablemanufacturing overhead		3
Fixedmanufacturing overhead ($250,000 ÷ 50,000 units)		5
Absorptioncosting unit product cost	$	23